The risks associated with Canada's long-running consumer debt binge are falling most heavily on the shoulders of the people who can least afford it, new data from Statistics Canada shows.
In a study on the debt and wealth of Canadian households, the agency found that the lowest income quintile in Toronto and Vancouver — meaning the one-fifth of households with the lowest earnings — have by far the heaviest debt loads of any people in the country.
Toronto families at the bottom of the income ladder are carrying debt equal to 420 per cent of their household income, compared to 250 per cent for Torontonians on the middle rung, and 162 per cent for the top fifth of earners.
Vancouver families on the bottom income rung are nearly as indebted, with a 400-per-cent debt-to-income ratio.
Compare that to Montreal, where the bottom fifth has just a quarter as much debt: 105 per cent. Unlike in Toronto and Vancouver, Montreal's lowest earners are not more indebted than other income groups.
These are households with incomes around $25,000 or less, "so especially in Vancouver or Toronto, it would be hard to imagine they would be borrowing for a house," said Priscilla Thiagamoorthy, an economic analyst at Bank of Montreal.
Thiagamoorthy figures a lot of this is credit card debt as well as student and car loans. And one reason it may be building up in Toronto and Vancouver is that these expensive cities' jobs attract young workers from other parts of the country, who then go into debt setting up a life for themselves.
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But Elizabeth Richards, a senior research economist at Statistics Canada and co-author of the study, thinks this might actually have to do with house prices.
She said that it does seem to be lower-income people with high-value assets who are carrying the most debt.
"It could be that even in the lowest income quintile, people do have large mortgages as well," she said, adding that the issue warrants further research.
There is, however, another possible explanation: Seniors taking out loans against the value of their homes. Living on a fixed income in retirement, they would appear as low earners in the statistics, but they have the collateral for large loans.
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Credit rating agency TransUnion reported last year that there has been a large spike in mortgages issued to the elderly. Much of that money is likely being given to children or grandchildren for home purchases.
And with interest rates on the rise, seniors have been having the hardest time of any group paying off their debts. While delinquency rates haven't budged much in Canada over the past year, they are up 7.2 per cent among seniors, credit rating agency Equifax said earlier this month.
Taken together, this data points to a rather disturbing prospect: That when the credit crunch finally comes, it will be the most economically precarious — and the eldest — members of our society who will suffer most.